What Are High Yield Bonds?
High yield bonds are corporate securities with credit ratings below investment grade. To attract investors, non–investment grade companies usually pay higher interest rates than issuers deemed to be more creditworthy, so their bonds are called “high yield.” High yield bonds can be used to diversify an investment portfolio because their performance has a low correlation with most asset classes, especially investment grade bonds such as Treasuries and high grade corporate debt. Like stocks, high yield bond prices are more sensitive to the economic outlook and corporate earnings than to day-to-day interest rate fluctuations. While high yield bonds share some behavioral characteristics with stocks, their overall returns should be less volatile because their income is generally much higher.

Credit analysis is central to high yield bond investing. It focuses on individual characteristics and fundamentals of issuers as well as the downside risk of default. The broad high yield market is diversified by industry group and issue type. Today’s vast global high yield market can enable portfolio managers to achieve extensive diversification by region, industry and issuer, as well as by the individual issue within a firm’s capital structure. By actively managing portfolios, PIMCO seeks to lower portfolio volatility while enhancing returns.

Applications for the High Yield Spectrum Strategy

Investment Philosophy for High Yield Spectrum

Sources of Added Value

Risk Management/Controls


Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. High-yield, lower-rated, securities involve greater risk than higher-rated securities. The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. PIMCO strategies utilize derivatives which may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. There is no guarantee that this investment strategy will work under all market conditions and each investor should evaluate their ability to invest for a long-term especially during periods of downturn in the market. Diversification does not ensure against loss.

The correlation of various indices or securities against one another or against inflation is based upon data over a certain time period. These correlations may vary substantially in the future or over different time periods that can result in greater volatility.

This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.